For a while, Scottish Mortgage (LSE: SMT) shares were among the wonders of the investment world. I remember when they were up 500% over a five-year period, turning this strangely named investment trust into a £20bn behemoth.
Some of the gloss remains, despite the departure of star manager James Anderson in March 2021. Anderson built the Scottish Mortgage Investment Trust phenomenon, which grew 1,700% over his 21-year tenure, boosted by early tech stock bets such as Tesla and Amazon.
It all came crashing down in 2022. That was a bad year for tech and a nightmare for Scottish Mortgage, which fell by half. Tech stocks rebounded at speed in 2023 but Scottish Mortgage only made patchy progress under new lead manager Tom Slater. So I was surprised to find myself buying it not just once, but twice.
What was I thinking?
I can’t recall having as many misgivings over a stock purchase as when I invested a tentative £2k in Scottish Mortgage on 30 May. That bought me 294 shares at 676p each. After the share price picked up, I returned for more on 1 August. This time my £2k got me 270 shares at 734p. Then I stopped.
Today, my 564 shares trade at 807.4p. I’m up 14.01% after charges, lifting my £4k to around £4,555. That’s a lot better than I feared. So should I buy more?
The main reason I bought Scottish Mortgage was for diversification. It’s a very different beast to the high yielding, dirt-cheap FTSE 100 dividend stocks I mostly bought last year.
Slater and deputy manager Lawrence Burns aim to “identify, own and support the world’s most exceptional growth companies”. It was always going to take a beating in 2022, as rocketing inflation discounted the real terms value of growth stocks’ future earnings. I’m hoping it will do better when animal spirits return.
Holding and hoping
Over 12 months, the Scottish Mortgage share price is up 13%. In truth, I would have expected better. Its biggest position is chip maker ASML Holdings, which makes up 8% of the trust. The second biggest is none other than Nvidia at 6.55%. Their shares have jumped 55% and 250% respectively over the last year.
That suggests to me that a lot of other stocks in the portfolio are underperforming. This clearly isn’t a London-listed proxy on the Magnificent Seven, despite the continuing presence of Amazon and Tesla, which also feature in the top 10. Are Slater and Burns holding onto Tesla for old time’s sake or do they really believe it can continue to outperform?
Scottish Mortgage contains lots of privately owned companies, whose value is impossible for me to judge. That leaves my money at the tender mercies of Slater and Burns, who haven’t yet convinced me they can replicate Anderson’s magic touch.
As my shares climb, my misgivings are slowly easing and I’ll hold what I’ve got. But I’m not sure I’ll buy more Scottish Mortgage shares for now.
